The number of searches for fixed rate products dropped on the back of successive cuts in the Bank of England Base Rate at the end of last year. By the start of 2009, searches for fixed rate products made up just 28% of all mortgage searches at moneysupermarket.com, having constituted 35% of searches six months earlier.
The first half of 2009 saw a change in momentum, as borrowers sought the security of fixed rate products to guard against a base rate increase. But since June popularity of fixed rate deals seems to be on the wane again; with fixed rate searches back down to just 29% of total mortgage enquiries.
Hannah-Mercedes Skenfield, mortgage spokesperson at moneysupermarket.com said: "Borrowers have become confident that the Base Rate will remain low for a while, making tracker and discounted deals more tempting. This appeal is likely to last as long as the Base Rate remains low and lenders such as HSBC and First Direct continue to offer headline rates on their discount and tracker mortgages.
"The cuts in the Base Rate have had a major impact on people's choices when looking for a new mortgage. Variable rate deals look very attractive now, but with a widening gap between average tracker prices and the Base Rate most are now priced so high above the Base Rate that if the Bank of England starts to raise rates again many borrowers could be left paying eye wateringly expensive repayments.
"Fixed rate deals provide borrowers with a level of fiscal security, sheltering them from the risk of a rise in interest rates, but they will have to pay for the privilege of this protection.
"Anyone looking for a mortgage linked to the Base Rate or Lender's SVR should assess their ability to make repayments should rates rise, and decide whether or not the gamble is worth it - at the moment our figures suggest more and more people believe it is."
